February 26, 2015

We Can’t Crowdfund Government Programs

Bike Walk KC

Kansas City used a crowdfunding drive to raise money for its bike-sharing program, and other governments are also using such approaches to pay for a wide array of programs.

Governments at the local, state, and federal levels are competing more and more often with charities for donations.

It used to be that governments appealed mostly to foundations, or public schools raised money from parents, or public parks found ways to get private gifts from people who use the parks.

Now the scale is growing much wider, with appeals reaching out to every member of the public, especially now that governments are using crowdfunding sites just as charities do to seek donations for a particular project.

The extra competition is the last thing nonprofits need, but that’s not the most important concern. Should we trust the vagaries of people’s personal motivations, and sometimes impulsive altruism, as a substitute for governments’ deliberation in recognizing priority problems and gathering the resources to address them over the long haul?

To be sure, impulse giving can produce a bonanza, even as it may can pose serious questions at the same time.

The incredibly successful ice-bucket challenge of the ALS Association raised over $115- million—that’s about six times the organization’s total revenue from all sources last year—for its work on Lou Gehrig’s disease (amyotrophic lateral sclerosis). It also drove worldwide donations of an additional $100-million.

No wonder governments, as well as nonprofits, are attracted to crowdfunding and similar campaigns. Yet, the ALS success also serves to highlight some very real concerns.

Few people, especially anyone close to someone with ALS, would begrudge the association a penny of those contributions. However, at some remove there is reason to question how and why the 2.4 million new donors to ALS (triple the previous number) made the decision to contribute to that cause.

Some 12,000 people in the United States suffer from ALS at any given moment, while 5.2 million people have Alzheimer’s. In the last comparable year for available IRS data, the Alzheimer’s Association had seven times the contributions of ALS (with the ice-bucket challenge, that advantage has assuredly decreased) for well over 430 times as many affected people. While there can be a debate beyond numbers about whether the ALS or the Alzheimer’s cause is a more pressing problem in need of higher priority, it is safe to say that the vast majority of "ice-bucketers" probably didn’t even consider that question or others of importance before deciding to get into the ice-dumping and donation competition.

That is a concern, because it’s not as if there’s a limitless pool of charitable dollars. Giving has long remained relatively static in the United States, at about 2 percent of GDP. No matter what a fundraising campaign generates for a particular cause, it’s quite likely that those dollars are not added to—but instead come out of—the philanthropic pool.

There has been much speculation and some academic analysis about what led to the astounding success of this highly creative ALS crowdfunding campaign; peer-pressure and the narcissism of social networking were crucial. Still, its viral scope is decidedly uncharacteristic and not easily copied.

Keeping donors interested—and willing to give again and again—is a major challenge nationwide. That’s hard enough for charities, but fickle donors are a more significant problem for government. What will happen when governments are unable to sustain support beyond one-time gifts?

Charity officials and others understand that crowdfunding depends in part on public relations, on media savvy. One study of science projects, for which the percentage of government funding has dropped by half since the 1960s, suggests that researchers with a large "fan base" (Facebook, Twitter, and YouTube) are the ones who can raise money. Government officials recognize this and are now promoting crowdfunding efforts through "old-fashioned fundraising strategies" using social networks and other media.

But that approach doesn’t help those who are not well known.

Charities can run campaigns that appeal to the narrow self-interests of prospective donors, and to whatever might catch their attention. But how do we feel when governments, which are supposed to look at the big picture, promote only those projects that are likely to be popular, such as building a local bike lane or a neighborhood park?

Government’s agenda ought not depend on ephemeral individual and foundation interests. Doing so moves government away from coherent efforts to solve public problems and toward treating them as fragmented matters subject to people’s passing fancy. It makes it profoundly more difficult for government—and charities—to adequately support and advance the broad-based and continuing efforts necessary to improve our social, political, and economic institutions.

As an example, more than 13,000 people recently donated more than $350,000 to a crowdfunding campaign that helped a Detroit factory worker, James Robertson, get a new car so he would no longer have to make his heroic commute—21 miles of walking each day, plus additional miles by bus. As remarkable as it is that Mr. Robertson has maintained a perfect attendance record, the campaign did little to deal with the real issues that caused his problem. As the columnist Michelle Singletary of The Washington Post points out, private donations did not do anything to ameliorate the lack of public transportation in low-income neighborhoods or the inability of working people to earn enough to own and maintain a car. To do so would require government policy changes and a commitment of significant public resources.

Crowdfunding and other individually focused campaigns also favor the economically well-to-do. Over the past decades, politicians have passed tax cut after tax cut favoring the wealthy, effectively transferring money due to public coffers back to those least in need. And now government asks them not to pay those taxes, but instead to voluntarily consider whether they might wish to divert some of their charitable giving to meet a promoted cause personally of interest to them, one that really should have been funded by the missing tax dollars.

That might be fine to fuel optional programs if governments were successfully meeting basic human needs, maintaining highways and bridges, providing quality public education, safeguarding our food supply, and so on, but they aren’t. There is a long history of governments cutting funds and then turning to foundations and corporations for public support.

Now, however, localities are also turning to individuals, tiny begging buckets in hand.

In spite of the fact that Mitt Romney and the libertarian Cato Institute both argue that "taxes are a form of charity," they most decidedly are not. Democratically elected officials are supposed to deliberate openly to decide what government will make a priority and how to generate the necessary public revenue for it; seeking donations through private voluntary action isn’t the same thing.

Governments are the primary force that serve the common good. Let us not substitute the often passing and arbitrary nature of individual altruism for what is, in fact, a continuing shared obligation. We need to go beyond joyful tinkering at the margins in joining friends for the lightheartedness of doing good in funding programs we like.

Let’s not shirk the hard work of improving the responsiveness and performance of our governments and the substantial sacrifice of providing them with the resources that all of us truly need.

Mark Rosenman is a professor emeritus at the Union Institute & University.